23-Year-Old Investor's $75K Portfolio: Top Assets and Reddit's Debate

In the dynamic world of investing, a 23-year-old investor has managed to amass a $75,000 portfolio, generating an impressive $1.8K in dividend income. This young investor's success has sparked a lively debate on Reddit, where fellow investors are weighing in on the top-performing assets in the portfolio and offering advice on what to add next. Let's dive into the details and explore the key factors considered by the Reddit community when recommending new assets for the investor's portfolio.

Top-Performing Assets in the Portfolio

While the specific assets in the 23-year-old investor's portfolio are not detailed, the materials discuss various investment options that could potentially be part of the investor's portfolio, such as dividend stocks, closed-end funds (CEFs), and other high-yield investments.

For example, the materials mention three high-yield dividend stocks: NexPoint Real Estate Finance, Mach Natural Resources, and the PIMCO Dynamic Income Fund. These stocks have average yields of approximately 14.6%, which could significantly contribute to the $1.8K dividend income. Specifically, NexPoint Real Estate Finance offers a dividend yield of 16.4%, Mach Natural Resources offers a yield of 15.3%, and the PIMCO Dynamic Income Fund offers a yield of 14.6%. By investing $75,000 across these three names, the investor could expect to collect roughly $11,000 each year in cash distributions, based on their current payouts.

Additionally, the materials discuss closed-end funds (CEFs) as an underappreciated alternative for generating passive income. For instance, the AllianceBernstein Global High Income Fund (AWF) pays a yield of 7.51%, the Nuveen Preferred & Income Securities Fund (JPS) offers a current yield of 7.17%, the New America High Income Fund (HYB) yields 7.62%, and the Eaton Vance Tax-Managed Buy-Write Income Fund (ETB) uses a covered-call strategy that boosts its yield to 7.93%. Investing $1 million spread equally across these four CEFs would generate $75,575 in annual passive income.

Key Factors Considered by the Reddit Community

The Reddit community considers several key factors when recommending new assets for the investor to add to their portfolio. These factors include:

1. Risk Tolerance and Time Horizon: Many commenters emphasized the importance of considering the investor's risk tolerance and time horizon. For instance, one Redditor argued that "One to two years is not enough time to invest in the stock market. Over that short period, it’s essentially gambling." This highlights the community's awareness of the need to match investment strategies with the investor's time frame and risk appetite.

2. Potential Returns vs. Risk: The community also considers the potential returns versus the risk involved. For example, a commenter suggested investing in the total U.S. stock market, stating, "With a small bit of risk, you can do much better than 4%." This indicates that the community is aware of the trade-off between risk and return and recommends investments that offer higher returns for the level of risk involved.

3. Liquidity and Safety: Given the investor's short-term horizon, many commenters recommended ultra-safe, liquid options. For example, one Redditor suggested buying shares of the iShares 0-3 Month Treasury Bond ETF (SGOV), which has a higher yield and is as safe as the U.S. government. This recommendation underscores the community's focus on liquidity and safety for short-term investments.

4. Diversification: The community also considers the importance of diversification. For instance, a commenter recommended investing in a mix of stocks, ETFs, and index funds to spread risk and potentially boost returns. This approach is supported by the data showing that historically, index funds like the S&P 500 have provided reliable growth over the long term.

5. Opportunity Cost: The community also considers the opportunity cost of keeping money in low-risk investments. For example, a commenter pointed out that "‘No risk’ investments such as [high-yield savings account] have risk… it’s just in the form of opportunity cost. In many scenarios, stock investment is less risky than letting money just sit in a [high-yield savings account] long-term." This highlights the community's awareness of the potential for higher returns from stock investments compared to low-risk savings accounts.

6. Market Conditions: The community also takes into account current market conditions. For example, a commenter advised that "Historically, the best way to reliably grow money has been index funds like the S&P 500. You may be thinking, 'Well, America is imploding, maybe now isn't the best time to invest.' And maybe that's true, but you can always find a reason not to invest, and throughout history, those reasons to not invest are destroyed by the ever-upward plodding gains in the S&P." This shows that the community considers the broader economic context when making investment recommendations.

Conclusion

The 23-year-old investor's success in generating $1.8K in dividend income from a $75,000 portfolio is a testament to the power of smart investing. The Reddit community's debate on the top-performing assets and recommendations for new additions highlights the importance of considering factors such as risk tolerance, time horizon, potential returns, liquidity, safety, diversification, opportunity cost, and market conditions. By taking these factors into account, the investor can continue to grow their portfolio and generate passive income.